What is the MarketPlace? – Exchange by Barter, Exchange with Money, and More
The marketplace is a process that operates when there are people who act as buyers and others as sellers of goods and services, generating the action of Exchange.
Traditionally the marketplace was understanding as a place where the processes of Exchange of goods and services occur between demanders and suppliers. Still, with the appearance of technology, markets no longer need a physical space.
However, for that reason, there is a marketplace as long as there are intentions to buy and sell. And the participants agree to carry out the exchanges at an agreed price.
Undoubtedly, the Exchange takes place because both participants obtain a benefit. That is, both parties win.
The basis of the marketplace is exchange
Human beings from ancient times realized the need to exchange because Exchange improved their living conditions.
1. Exchange by barter
- In the same way, markets arose before money appeared, since people gathered in certain places in their communities, taking part in what they produced and exchanged it for what they could not have.
- In reality, the first exchanging was making through barter. That is, it exchanged one good for another; or by direct Exchange.
2 . Exchange with money
- Of course, when money appeared, exchanging was facilitating since the Exchange was indirect, which allowed the expansion of exchanges in time and space.
- On the other hand, indirect Exchange allowed the evolution and improvement of markets, making them more efficient.
For the marketplace to operate, you need someone to buy and someone to sell, and these two parts are what make up the market.
- On the one hand, the buyer is the person who acts in a marketplace to acquire a good or service in Exchange for giving another good (if it is by barter) or by paying an amount of money. (if it is by indirect Exchange).
- When someone buys, this person considers that the good they are receiving is worth more than the good or the price they are delivering.
- Furthermore, we call buyers in the marketplace plaintiffs, and plaintiffs maximize their utility when they buy at low prices.
- Now, the seller, for his part, is the subject who is willing to deliver one sound for another (Exchange by barter), or in exchange for a quantity of money (indirect Exchange).
- On the one hand, the seller considers that the good or the money he is receiving has more value than the good or service he offers.
- Thus, sellers know in the marketplace as bidders and every bidder. Maximizes his utility when he manages to sell at the highest prices in the market.
- Main markets the principal marketing place can be well-ordered into the goods and services market and the production factors market.
3. Market for goods and services
- Therefore, the market for goods and services is where you buy different goods and services produced in the market.
- For this reason, the suppliers or sellers in this market are the companies that carry out the activity of the production of these products and then offer them in the market, placing a price on them.
- On the other hand, the demanders are generally the individuals and families who need these goods and services for their consumption.
- But institutions and companies that need these goods and services for their consumption. Commercialization or to be used as an input in a subsequent production process is also demanding.
4. Marketplace of production factors
- On the other hand, in the market for production factors, productive factors such as raw materials, capital, and labor are exchanged. Then, these factors are combined by companies to be able to carry out their productive tasks.
- Of course, in the labor market, the suppliers are the individuals and families who sell these production factors and charge a price for them.
- At the same time, companies function as plaintiffs since they are willing to pay the fee to obtain production factors.
Markets for factors of production can therefore be dividing into three:
Why the exchange is possible?
On the one hand, the Exchanging could not be carrying out because the interests that move the buyer and the seller are the opposite.
1. Contrary interests
- Above all, the seller seeks to get a high price and the buyer a low cost. However, that is where the market phenomenon works. Because finally, the participants reach an agreement on fees.
2. The market price benefits the buyer and seller
- In any case, the agreed price benefits both the applicant and the offeror. For that reason, exchanges are carrying out, generating wealth for those who offer the goods and services and those who demand them, making everyone cooperate in the market for the profits made.
- Consequently, the price where the buyers and sellers agree is called the equilibrium price in the market, and at that price, all participants are satisfied and willing to carry out the exchange action.
- Finally, we can say that the market is an essential mechanism for making proper use of scarce resources; when there is a lot of demand, the price rises, which guides the producers to produce more of this good.
- Similarly, when there is a lot of supply, prices immediately begin to fall, and the favorable price for the marketplace, in general, is restored.
- When demand falls, the price also fails, and suppliers know that it is not convenient to produce more of this good because the marketplace is well supplying. For this reason, the supply decreases, and again the price tends to rise and achieve equilibrium.
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